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Philip Morris USA Seeks Limit on Bond

Asks North Dakota Supreme Court to limit bond to $50 million.

August 22, 2004, 08:00 pm

BISMARCK, N.D. -- Following the example of other states that have set such limits, North Dakota's Supreme Court has scheduled an Oct. 4 hearing to determine whether to impose a $50 million limit on any bond that may be required to appeal a lawsuit verdict, according to the Associated Press.

The proposed rule would affect appeal bonds, which lawsuit defendants may be ordered to post as a condition for appealing a money judgment against them. The bond is intended to ensure a lawsuit's winner is paid if the losing defendant's appeal is unsuccessful. It also prevents the winner from trying to collect while an appeal is pending.

The North Dakota Supreme Court's rules now give district judges latitude in setting appeal bond amounts. The bond cap, an idea that Philip Morris USA and other tobacco companies have successfully pushed elsewhere, has drawn support from some North Dakota groups, including the Farm Bureau, the state chamber of commerce and a trade association that represents service stations.

"Fortunately, multimillion-dollar verdicts are rare in North Dakota. Nonetheless, we should not be the last state in the nation to reform our bonding requirements," the Farm Bureau's president, Eric Aasmundstad, said in a letter to the Supreme Court.

Attorney General Wayne Stenehjem believes the proposed cap is unwise, and plaintiffs' lawyers said it would extend special treatment to lawsuit defendants who may have harmed thousands of people.

Supporters of the limit argue it helps preserve the rights of a company when it is hit with a huge jury award that is likely to be reduced on appeal. Otherwise, a company may have to seek bankruptcy protection in order to appeal, to prevent its assets from being seized, said John Olson, a Bismarck attorney for Philip Morris.

Philip Morris encountered the problem in an Illinois case, when a state judge ruled in March 2003 that the company had violated Illinois consumer protection law by implying its "light" cigarette brands posed less health risk for smokers.

The judge, Nicholas Byron, said Philip Morris owed $10.1 billion in damages, and ordered the company to post a $12 billion bond if it wanted to appeal his ruling.

Philip Morris said it could not post the bond without seeking protection from creditors in bankruptcy court. The Illinois Supreme Court intervened, and the bond was cut almost in half, to $6.8 billion.

Thirty states have adopted appeal bond limits in recent years, according to Covington & Burling, a Washington, D.C., law firm that represents Philip Morris. Most range from $25 million to $150 million.